Thanks - but that means taking a hit of 40,000 on the apartment, which I'd be very reluctant to do. Surely it's better to hold tight until the market bottoms out?
Not really. Or at least, not necessarily. Say the apartment would currently realise 210k [just as an example] and your "trade up" house / apartment is currently on the market for 350k. You can take it pretty much for granted that you'll be able to negotiate on that unless the price is really reflecting current conditions, so let's say you could get it for 310k. 100 k cost. Add in your various transaction costs, and it will cost you stamp duty of 12,950, solicitor's fees, agent's fees - maybe 20k in all. Total cost of trade-up, 120k, of which 40k is the "hit" on the apartment.
Now, contrast that with "wait it out" until you can be guaranteed your money back on the apartment:
If your apartment would currently sell at 210 (and I know we're taking figures out of the air here, but it's only by way of illustration - principle will still hold), then you'll need the market to rise by 19% to "recoup" that 40k. But wait! - the price of your "trade up" also goes up. Your 310k house is now 369k. 119k cost. Add in your various transaction costs: your stamp duty goes up to about 17k, solicitor's fees, agent's fees - maybe 24k in all. Total cost of trade-up, 143k - 23k more than if you took the "loss".
Fair enough, markets don't behave uniformly and FTB markets tend to go up first in a rising market. There's every possibility that waiting won't cost you all of that extra 23k.
You know, I've just re-read your post again - "wait until the market bottoms out" *and* not take a hit on the apartment?
Waiting until the market bottoms out is a good strategy, if you can guarantee you can detect when that is - often not easy. But you will take a hit on the apartment if you do.
Which means, in my opinion, that the best strategy is probably to decide what you can afford by way of trade up costs, see what budget that gives you, look at what's on the market in that general range, and then make a decision based on your and your spouse's needs and wishes for a home that you expect to live in for not less than ten years.